Payday Loans: Debt Trap by Design

Payday loans are an abusive form of lending that traps cash-strapped borrowers into a long-term cycle of debt.

Payday loans carry astronomical rates; with fees and interest they generally are over 300% annually for traditional two-week loans and over 200% annually for longer term loans. Lenders make these loans without regard to a borrower’s ability to repay because lenders obtain access to the borrower’s bank account. They stand first in line for repayment on the borrower’s payday, leaving the borrower short on cash for other obligations.

Payday loans are debt traps by design. Borrowers get trapped in a cycle of repeat borrowing, causing them to fall behind on other bills, delay medical care, overdraft and lose their bank accounts, and file bankruptcy.

But now, out-of-state payday lenders are working to weaken our law so they can flood Pennsylvania with 1,000 storefronts peddling loans that were so harmful to our nation's soldiers that President George Bush signed a law to prohibit them from being made to military families.

Society of St. Vincent De Paul - Philadelphia Archdiocesan Central Council

Southwestern PA CLUW (Coalition of Labor Union Women Pittsburgh)

St. Martin Center, Inc

St. Martin de Porres Catholic Worker House (Harrisburg)

10,000 Friends of Pennsylvania

Tabor Community Services

Transport Workers Union Local 234

The Pennsylvania AFL-CIO

The Pennsylvania State Council of Vietnam Veterans of America

The Reinvestment Fund

The Sight Center of Northwest Pennsylvania

The Women and Girls Foundation of Southwest PA

Unitarian Universalist PA Legislative Advocacy Network

United Methodist Advocacy in Pennsylvania

United Way of Chester County

United Way of Erie County

United Way of Greater Philadelphia and Southern New Jersey

United Way of Westmoreland County

United Way of York County, PA

Union City Family Support Center

Urban Affairs Coalition

Veterans Leadership Program of Western Pennsylvania

Westmoreland Community Action

Updates and Resources:

Payday Lenders' Bill StalledA fast-moving, late-dropped bill that would allow payday lenders to evade our state interest rate cap had been scheduled for a vote before the House Commerce Committee on June 20th. The bill, HB 2429, is yet another sneak attack to make high-cost predatory loans in PA.

Legislators heard the call from a diverse set of voices not to harm our most vulnerable, and the payday lenders currently do not have enough support to move the bill forward. They are drafting an amendment to the bill. One idea being floated would legalize high-cost, long-term payday loans, similar to what the payday lenders have tried to pass through the PA Senate in prior sessions. The amendment has not been released. Stay tuned...

PA Groups Respond to CFPB RulePennsylvania groups applaud the CFPB for recognizing the devastating harm caused by predatory payday lending, and for affirming that state interest rate caps, like we have in PA, are the best way to protect people from abusive lending practices. Statement available here.Payday Lenders' Trojan Horse Fails: 2015-2016 Session

The payday lenders were back in Harrisburg.

On June 1, 2015, Senator John Yudichak, who has co-sponsored payday lenders’ bills in prior sessions, circulated a memorandum urging his colleagues to join him in co-sponsoring legislation to legalize a new loan product in Pennsylvania, called the “Pennsylvania Financial Services Credit Ladder.”

The memo cites current Consumer Financial Protection Bureau (CFPB) proposals as a model for the legislation, as well as a recent study by the Pew Charitable Trust as evidence of the need for these loans.

The problem? Pennsylvania already has one of the strongest payday lending laws in the country.

Since the CFPB cannot set interest rate caps, changing our law by adopting the CFPB rule in Pennsylvania will weaken it. In fact, the same Pew Charitable Trusts study cited in the co-sponsorship memo says that states like Pennsylvania should keep their strong laws on the books.

For any questions or comments about the coalition working to keep predatory payday loans out of Pennsylvania, please contact us here.This website is paid for by Community Legal Services, Inc. on behalf of its low-income clients,1424 Chestnut St. Philadelphia, PA 19102.